Focus | La revue de presse économique et financière

October Surprise?

It has been 11 months since the last 5% correction in equity markets, and the coming weeks present a number of significant potential risks.

When was the last time the S&P 500 experienced a correction greater than 5%? October of last year. Which month has delivered the worst S&P 500 performance, on average? September.

If that makes you nervous, you are unlike many investors, who appear to have returned from the August break in good spirits.

Those spirits are understandable: Bond yields remain low and equity markets are still near record highs. Volatility is subdued. Global coronavirus cases appear to be plateauing. Economic data has softened a little since we reached “peak growth” early in the summer, but it remains largely expansionary—and softer data is acceptable as long as it removes some of the inflationary threat to central banks’ accommodative stance. Exhibit A is the market’s response to the disappointing U.S. jobs number that was recently released.

Still, there are a few reasons why volatility is likely to pick up over the coming weeks and months, and they have nothing to do with stock market history.

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